Interim Management Statement. at September 30, 2010

Transcription

1 Interim Management Statement at September 30, 2010 Translation from Italian original which remains the definitive version RCS MediaGroup S.p.A. Via San Marco, Milan Share capital 762,019,050 Company Registration, Tax Code & VAT number: ; Business Register number:

2 Contents Consolidated financial highlights of RCS MediaGroup... 3 Group performance in the third quarter... 4 Group performance at September 30, Other information Operating segment performance Newspapers Italy Newspapers Spain Books Magazines Advertising Dada Television Corporate Functions Significant events in the third quarter Significant subsequent events Outlook for the current year Condensed Interim consolidated financial statements Condensed income statement Condensed statement of comprehensive income Condensed statement of financial position Condensed statement of cash flows Condensed statement of changes in equity Notes to the condensed interim consolidated financial statements Format, content and other information on the interim financial statements Statement pursuant to art. 154-bis par. 2 decree 58/ Attachments Quarterly consolidated income statements

3 CONSOLIDATED FINANCIAL HIGHLIGHTS OF RCS MEDIAGROUP ( /millions) 3rd quarter Cumulative at September (1) (1) (1) (1) INCOME STATEMENT Revenue , ,621.2 EBITDA (2) EBIT 27.8 ( 1.6) 40.5 ( 56.3) Profit (loss) before tax and non-controlling interests 16.5 ( 12.7) 22.9 ( 87.4) Income taxes ( 7.9) 5.6 ( 22.2) 20.0 Profit (loss) from continuing operations 8.6 ( 7.1) 0.7 ( 67.4) Profit (loss) from assets held for sale and discontinued operations (3) ( 5.9) Net profit (loss) for the period 10.6 ( 8.2) 0.7 ( 73.3) Basic earnings per share: continuing operations ( 0.012) ( 0.094) Diluted earnings per share: continuing operations ( 0.012) ( 0.094) Basic earnings per share: assets held for sale and discontinued operations ( 0.008) Diluted earnings per share: assets held for sale and discontinued operations ( 0.008) STATEMENT OF FINANCIAL POSITION 30/09/ /12/ /09/2009 Net capital employed 2, , ,252.8 Net financial debt (4) 1, , ,122.4 Total equity 1, , ,130.4 Average number of employees excluding those involved in assets held for sale and discontinued operations 6,211 6,427 6,466 (1) Dada Entertainment has been consolidated since June 2009, having been previously equity accounted. In addition, Poundhost, a provider of hosting and virtual services was acquired on January 18, These transactions had an overall impact of 12.7 million on revenue ( 8.1 million in the same period of 2009) and 2.5 million on EBITDA ( 2.3 million at September 30, 2009) in the first nine months of (2) Earnings before interest, tax, depreciation, amortization and impairment losses. (3) Refers to the Unidad Editorial Group's printing operations and the operations of the subsidiary La Coccinella. (4) Indicator of financial structure, calculated as current financial liabilities less cash and cash equivalents, current financial assets and non-current financial assets recognized for derivatives. This Interim Management Statement at September 30, 2010 was approved by the Board of Directors on November 10,

4 GROUP PERFORMANCE IN THE THIRD QUARTER The third quarter of 2010 confirmed a progressive easing of the economic downturn, the first signs of which had been seen in the fourth quarter of 2009 and confirmed in the first half of However, there were not yet any clear signs of a trend reversal, while the economic environment continued to be extremely uncertain, especially in Spain. The press advertising market in Italy showed substantially stable performance as compared to the third quarter of 2009, while the press advertising market in Spain, which had an overall downturn in the third quarter, continued to show the positive inversion of the trend reported last June, limited to the sports dailies segment in relation to major sporting events. The Group's financial highlights and related comments are presented below. Reclassified consolidated income statement ( /millions) 3rd quarter 2010 % 3rd quarter 2009 % Difference (4) (4) A B A-B Revenue Distribution revenue Advertising revenue (1) Other publishing revenue (2) (0.8) Op erating exp enses (385.1) (70.3) (379.7) (71.8) (5.4) Personnel expense (102.8) (18.8) (111.8) (21.1) 9.0 Imp airment losses on receivables (6.1) (1.1) (4.6) (0.9) (1.5) Increases in p rovisions for risk (2.0) (0.4) (4.5) (0.9) 2.5 EBITDA (3) Amortization of intangible assets (14.4) (2.6) (14.2) (2.7) (0.2) Dep reciation of p rop erty, p lant and equip ment (9.9) (1.8) (9.7) (1.8) (0.2) Impairment losses on non-current assets (5.8) (1.1) 5.8 EBIT (1.6) (0.3) 29.4 N et financial income (exp ense) (7.3) (1.3) (10.5) (2.0) 3.2 N et gains (losses) on financial assets/liabilities Share of profits (losses) of equity-accounted investees (4.2) (0.8) (0.6) (0.1) (3.6) Profit (loss) before tax (12.7) (2.4) 29.2 Income taxes (7.9) (1.4) (13.5) Profit (loss) from continuing operations (7.1) (1.3) 15.7 Profit (loss) from assets held for sale and discontinued operations Profit (loss) for the period (7.1) (1.3) 15.7 (Profit) loss attributable to non-controlling interests (1.1) (0.2) 3.1 Profit (loss) attributable to owners of the parent (8.2) (1.6) 18.8 (1) Advertising revenue in 3rd quarter 2010 comprises 80.4 million earned through the group concessionaire RCS Pubblicità (of which 57 million by Newspapers Italy, 21.6 million by Magazines and 1.8 million by selling the space of other publishers) and 65 million earned directly from publishers (of which 41.9 million by Newspapers Spain, 6.5 million by Blei, 5.6 million by Magazines, 5.6 million by Newspapers Italy, 5.2 million by Dada and 0.8 million by Digicast less 0.6 million in intragroup eliminations). Advertising revenue in 3rd quarter 2009 comprises 77.5 million earned through the group concessionaire RCS Pubblicità (of which 54.8 million by Newspapers Italy, 20.9 million by Magazines and 1.8 million by selling the space of other publishers) and 55.6 million earned directly from publishers (of which 37.2 million by Newspapers Spain, 5.6 million by Blei, 4.7 million by Magazines, 4.2 million by Dada, 3.7 million by Newspapers Italy, and 0.9 million by Digicast less 0.7 million in intragroup eliminations). (2) Other publishing revenue mostly refers to the revenue of the Dada Group, revenue from the sale of film rights by the Unidad Editorial Group, revenue from the television activities of Digicast and the Unidad Editorial Group, royalty revenue from third parties, revenue from sporting events in Italy and Spain, and revenue from the sale of customer lists and children's boxed sets by companies in the Sfera Group. (3) Earnings before interest, tax, depreciation, amortization and impairment losses. (4) Poundhost, a provider of hosting and virtual services was acquired on January 18, These transactions had an overall impact of 1.5 million on revenue and 0.4 million on EBITDA in 3rd quarter Revenue for the third quarter of 2010 amounted to million compared with million in the same period the year before. The increase of 19.4 million is largely due to advertising revenue ( million) and distribution revenue (+ 7.9 million), while other publishing revenue was substantially stable (-1% compared to other publishing revenue in the third quarter of 2009). Excluding the revenue from consolidating the Dada 4

5 Group's acquisition of Poundhost on January 18, 2010, the decrease in other publishing revenue would have been 2.3 million. The positive performance of advertising revenue relative to the third quarter of 2009 is attributable to Newspapers Spain (+ 4.6 million on the same period of 2009) due to higher advertising revenue for Marca, as well as the positive performance of Internet advertising revenue (+42.2% compared to the third quarter of 2009), in addition to the exponential growth in revenue for Veo Tv following the country's final switchover to digital terrestrial and the start in March of the advertising concession with A3 advertising (the television concessionaire for the Antenna 3 Group) for managing the advertising on the Veo 7 channel. Advertising revenue was also higher for Newspapers Italy (+ 4.2 million), mainly thanks to the contribution of La Gazzetta dello Sport, which continued to benefit from the major sporting events of the second quarter of Advertising revenue also increased for Magazines (+ 1.5 million) to a greater extent than the improvement in the specific market, for Dada (+ 1 million) and for Blei, the foreign media advertising concessionaire (+ 0.9 million). Advertising revenue for other operating segments was substantially stable. Distribution revenue was 7.9 million higher than in the third quarter of 2009, reflecting: An increase of 6 million attributable to distribution revenue for Newspapers Italy, as a result of the good performance of distribution and, in deviation from the performance during the year, in add-ons, which increased due to the successful launches promoted during the year based on a schedule which favored the third quarter. There was an increase in price for Corriere della Sera with effect from January 2, 2010, except for Thursdays and Saturdays. Distribution revenue increased by 3.3 million for Newspapers Spain, as a result of sales of joint branded Marca-El Mundo add-ons, sustained by Spain winning the World Cup in July, as well as by the growth in revenue from distributing third-party products and an increase in the price of El Mundo.es introduced at the start of These increases were only partly offset by the downturn in distribution of the main titles. An increase of 1.4 million in distribution revenue for the Partworks division in the Books segment, mainly due to the success of partworks on foreign markets, particularly Russia and Ukraine, and to the favorable exchange rate. This increase is only partly offset by a downturn in sales in Italy. A decline of 1.8 million for Magazines, as a result of lower distribution, as well as a different mix of add-ons sold together in the summer. A decline in Books (- 1 million), due to the downturn in revenue for the Fiction and Non-Fiction segment (- 4.1 million) as a result of the unfavorable comparison with distribution revenue of the third quarter 2009 marked by the successful Millennium trilogy, as well as the decline in publishing revenue for Education (- 1.7 million) as a result of moving up part of the sales campaign in the second quarter This decrease was partly mitigated by increased revenue of Flammarion (+ 4.4 million), due to its excellent portfolio of new books and particularly lively catalogue, and by the increase in revenue from the US Illustrated Books division (+ 0.4 million), fostered by the recovery in the US market and the exchange rate trends. Other publishing revenue was down by 0.8 million. Adjusting for the fact that Poundhost was not consolidated in the third quarter 2009 since its control was subsequently acquired, the downturn would have been 2.3 million. Specifically, other publishing income of the Dada Group decreased by 4.1 million on a like-for-like basis, due to the gradual withdrawal of some traditional products; while a countertrend was demonstrated by the growth in other publishing revenue of Flammarion (+ 1.4 million) due to higher sales of author s rights as well as of Newspapers Spain (+0.8 million) due to the increase in revenue from events and conferences. EBITDA was a positive 52.1 million, falling to 49.3 million if net non-recurring income is excluded. The increase in EBITDA on the third quarter of the prior year was 24 million. Excluding net non-recurring income of 2.8 million in the third quarter of 2010 and non-recurring net expense of 6.2 million in the third quarter of 2009, as well as 0.4 million for the effect on the third quarter of 2010 of consolidating assets deriving from the acquisition of Poundhost on January 18, 2010, the increase would be 14.6 million. This includes 13.1 million in benefits from the reorganization plan started in May

6 The main factors influencing this performance were the increase in EBITDA before non-recurring income and expense for Newspapers Italy ( million) and Newspapers Spain (+ 6.6 million), largely due to the growth in revenue, particularly from advertising revenue, and to the reduction in costs thanks to the actions taken in 2009 under the reorganization plan, plus further cost-saving measures adopted in This performance is only partly offset by the decrease in like-for-like EBITDA before non-recurring expense for the Dada Group (- 2.8 million), mainly due to the contraction in the mobile business due to continuous evolution in this particular market, as well as by the decrease in EBITDA before non-recurring expense for the Advertising segment (- 2.3 million), as a result of a different mix of advertising media, with increasing importance of on-line media and the resulting increase in the weight of the relative commissions on profit (loss). EBITDA for the remaining operating segments, excluding non-recurring income and expense, was substantially stable. Personnel expense in the third quarter of 2010 was 9 million lower. Excluding net non-recurring income of 3.7 million in the third quarter of 2010 and non-recurring expense of 3.2 million in the third quarter of 2009, personnel expense would have decreased by 2.1 million. The third quarter of 2010 reported an operating profit of 27.8 million, compared with a loss of 1.6 million in the third quarter of the previous year. The improvement reflects the factors described above. Moreover, 5.8 million in impairment losses on property, plant and equipment were recognized in the third quarter of 2009 after reorganizing newspaper printing operations. No impairment losses were recognized in the third quarter of Amortization and depreciation came to 24.3 million compared with 23.9 million for the third quarter of 2009, demonstrating substantially stable performance. Revenue, EBITDA and operating profit (loss) in the third quarters of 2010 and 2009 are reported below by operating segment: ( /millions) 3rd quarter rd quarter 2009 Revenue EBITDA % of % of % of % of EBIT Revenue EBITDA EBIT revenue revenue revenue revenue Newspapers Italy (1) % % % (3.7) (2.9)% Newspapers Spain % % % (6.6) (6.0)% Books % % % % Magazines % % % % Advertising 87.8 (5.5) (6.3)% (6.0) (6.8)% 83.4 (3.5) (4.2)% (3.9) (4.7)% Dada (1) % (1.0) (2.7)% % % Television % % % % Corporate Functions 13.9 (1.9) (13.7)% (6.7) n.a 14.2 (4.3) (30.3)% (9.3) n.a Other and eliminations (89.4) (0.0) n.a (0.0) n.a (86.8) (0.0) n.a (0.0) n.a Consolidated total % % % (1.6) (0.3)% (1) In addition, Poundhost, a provider of hosting and virtual services was acquired on January 18, This transaction had an overall impact of 1.5 million on revenue and 0.4 million on EBITDA in 3 rd quarter Net financial expense amounted to 7.3 million in the third quarter, compared with 10.5 million in the third quarter of The total decrease of 3.2 million is essentially due to lower interest expense on loans ( 1.2 million), mainly due to the reduction in interest rates and, to a lesser extent, the reduction in average net financial debt during the quarter, added to the lower negative contribution of interest rate hedging derivatives ( 1.3 million) and other minor positive items. The share of profits (losses) of equity-accounted investees was a net loss of 4.2 million. This amount to 0.6 million in the third quarter of Net charges were up 3.6 million on the third quarter 2009, which benefited from the income from the negative goodwill of 3.4 million arising on the increase in the percentage of the equity investment in the Finelco Group. Excluding this income, net charges decrease by 0.2 million. The profit attributable to owners of the parent amounted to 10.6 million in the third quarter of 2010 compared with a loss of 8.2 million in the third quarter of This represents an improvement of 18.8 million in the third quarter of 2009 and reflects the factors discussed above, and includes 7.9 million in income taxes (compared to profit of 5.6 million in the third quarter of 2009). 6

7 GROUP PERFORMANCE AT SEPTEMBER 30, 2010 The Group's financial highlights and related comments are presented below. Reclassified consolidated income statement ( /millions) September 30, 2010 % September 30, 2009 % Difference (5) (5) A B A-B Revenue 1, , Distribution revenue (17.3) Advertising revenue (1) Other publishing revenue (2) Operating expenses (1,164.7) (70.8) (1,176.1) (72.5) 11.4 Personnel expense (333.5) (20.3) (382.9) (23.6) 49.4 Impairment losses on receivables (16.0) (1.0) (14.4) (0.9) (1.6) Increases in provisions for risk (6.4) (0.4) (17.5) (1.1) 11.1 EBITDA (3) Amortization of intangible assets (42.0) (2.6) (42.3) (2.6) 0.3 Depreciation of property, plant and equipment (30.0) (1.8) (29.9) (1.8) (0.1) Impairment losses on non-current assets (11.6) (0.7) (14.4) (0.9) 2.8 EBIT (56.3) (3.5) 96.8 Net financial income (expense) (21.6) (1.3) (26.3) (1.6) 4.7 Net gains (losses) on financial assets/liabilities Share of profits (losses) of equity-accounted investees (0.9) (0.1) (4.8) (0.3) 3.9 Profit (loss) before tax (87.4) (5.4) Income taxes (22.2) (1.3) (42.2) Profit (loss) from continuing operations (67.4) (4.2) 68.1 Profit (loss) from assets held for sale and discontinued operations (4) (5.9) (0.4) 5.9 Profit (loss) for the period (73.3) (4.5) 74.0 (Profit) loss attributable to non-controlling interests Profit (loss) attributable to owners of the parent (73.3) (4.5) 74.0 (1) Advertising revenue in the first nine months of 2010 comprises million earned through the group concessionaire RCS Pubblicità (of which million by Newspapers Italy, 72.6 million by Magazines and 6.2 million by selling the space of other publishers) and million earned directly (of which million by Newspapers Spain, 28 million by Newspapers Italy, 21.5 million by Blei, 18.6 million by Magazines, 15 million by Dada and 2.6 million by Digicast less 1.9 million in intragroup eliminations). Advertising revenue in the first nine months of 2009 comprised million earned through the group concessionaire RCS Pubblicità (of which million by Newspapers Italy, 72.9 million by Magazines and 6.8 million by selling the space of other publishers) and million earned directly (of which million by Newspapers Spain, 25.1 million by Newspapers Italy, 20.7 million by Blei, 19.5 million by Dada, 18.8 million by Magazines and 2.6 million by Digicast less 2 million in intragroup eliminations). (2) Other publishing revenue mostly refers to the revenue of the Dada Group, revenue from the sale of film rights by the Unidad Editorial Group, revenue from the television activities of Digicast and the Unidad Editorial Group, royalty revenue from third parties, revenue from sporting events in Italy and Spain, and revenue from the sale of customer lists and children's boxed sets by companies in the Sfera Group. (3) Earnings before interest, tax, depreciation, amortization and impairment losses. (4) At September 30, 2009 it refers to the Unidad Editorial Group's printing operations and the operations of the subsidiary La Coccinella. (5) Following a strategic agreement between Dada and Sony Music Entertainment, Dada Entertainment, a US company, has no longer been equity accounted but consolidated since the month of June In addition, Poundhost, a provider of hosting and virtual services was acquired on January 18, These transactions had an overall impact of 12.7 million on revenue ( 8.1 million in the same period of 2009) and 2.5 million on EBITDA ( 2.3 million at September 30, 2009) in the first nine months of Revenue came to 1,644.7 million at September 30, 2010, up 23.5 million on the first nine months of Excluding the revenue from consolidating the Dada Group's acquisitions made since June 2009, revenue would have amounted to 10.8 million. Advertising revenue was 30.5 million up on the first nine months of 2009, mainly thanks to the growth in advertising revenue both by Newspapers Italy ( million), with all sectors, except for the free press, outperforming their respective markets, and by Newspapers Spain ( million), reflecting good performances by Marca, Radio Marca, the internet and Veo 7. These improvements were partly offset by lower advertising revenue for Dada (- 4.5 million). 7

8 Distribution revenue declined by 17.3 million compared to the same period of Excluding add-ons, revenue would have been 0.9% higher. This improvement principally reflects: A decrease of 11.4 million for Newspapers Italy, due to lower add-on revenue that was only partly mitigated by good newsstand sales of La Gazzetta dello Sport and the price rise for Corriere della Sera with effect from January 2, 2010, except for Thursdays and Saturdays. A decrease of 3.5 million for Magazines, reflecting lower circulation and a different mix of add-ons. RCS titles reported a less steep drop in circulation overall than the market average. Going against the trend, circulation of women s titles increased on the first nine months of 2009, in a continuing unfavorable market. A decrease of 2.8 million in distribution revenue for Newspapers Spain, primarily due to fewer addon launches after focusing on products more tailored to reader demand. El Mundo.es also reported lower circulation than in the first nine months of 2009, in line with the performance of its specific market, as well as Expansion, as a result of the difficult economic situation in Spain, and Marca, whose circulation reflected an unfavorable comparison with the same period of 2009 which had benefited not only from the presence of news about well-known investigations and from greater promotional campaigns. These decreases were partly absorbed by the growth in revenue from distributing thirdparty products and by an increase in the price of El Mundo.es, introduced at the start of A decrease of 2.1 million in revenue for Corporate Functions, mainly reflecting the drop in revenue at RCD Redazione Contenuti Digitali following the sale of its radio news services business unit in July The drop of 1 million in distribution revenue for the Books segment, due to the decline in revenue from Fiction and Non-Fiction (- 16 million), which in 2009 benefited from the exceptional success of the Millenium trilogy, only partly offset by the revenue from the Flammarion Group ( million), as a result of an extensive portfolio of new books, and the Education division (+ 0.8 million), and Rizzoli International Publications Inc. on the illustrated books market in the United States (+ 2.6 million). Flammarion s successful books published in the first nine months of 2010 include La methode Dukan illustrè by Pierre Dukan and La carte et le territoire by Michelle Houellebecq. An increase of 3.5 million for the Partworks division, mainly due to strong sales on foreign markets, such as Russia and Ukraine, and to the favorable exchange rate against the original currencies. Other publishing revenue was up by 10.3 million. Excluding the revenue from consolidating the Dada Group's acquisitions made since June 2009, other publishing revenue would have been 2.4 million lower than in the first nine months of The like-for-like contraction in revenue referring only to the Dada Group would reflect a million decrease in other publishing revenue for the gradual withdrawal of certain traditional products, partly as a result of starting up new services. Other publishing revenue also reflects lower revenue from fewer direct marketing initiatives for third parties in the Magazines segment (- 2.1 million) and lower revenue from Television (- 1.1 million) due to the general macroeconomic difficulties and digital terrestrial competition. Other publishing revenue from Corporate Functions was 0.2 million lower. These trends were partly offset by a growth in revenue for sporting events earned by Newspapers Italy (+ 2.9 million), particularly in relation to the 93rd edition of the "Giro d Italia" cycling race, and by Newspapers Spain (+ 4 million), due to the development of activities related to Events and Conferences. The Books segment also posted an increase in other publishing revenue (+ 2.7 million), as a result of higher sales of editorial rights by the Flammarion Group. On May 14, 2009 the Board of Directors approved a series of targeted structural measures aimed at tackling the severe crisis in the publishing sector and through a significant revision of internal processes and consequent reduction in the cost structure. These structural and permanent measures have affected all the Group s companies in Italy and abroad (except the Dada Group), and seek to cut all major items of cost (including personnel expense) by over 200 million. The cost of these measures was mostly incurred in the prior year. In fact, the Group recognized a total of million in costs in 2009 (of which 109 million affecting EBITDA), while, on the contrary, nonrecurring income net of non-recurring expense amounted to 1.8 million in the first nine months of These 8

9 interventions have affected the Group s cost structure. They generated million in 2009 (of which million in the first nine months of 2009) and 50.3 million more in benefits in the first nine months of 2010, reaching and exceeding, prior to the date forecast, the set target of about 200 million. EBITDA was a positive million ( million, excluding net non-recurring expense). The improvement of 93.8 million on the corresponding prior year period would be 56.6 million excluding net non-recurring income in the first nine months of 2010 ( 1.8 million) and net expense in the first nine months of 2009 ( 32.9 million), and the impact on the period in question of consolidating the Dada Group's acquisitions made since June 2009 ( 2.5 million). Assuming a consistent comparative basis and excluding non-recurring income and expense, the improvement primarily reflects: Increases in EBITDA before net non-recurring expense and income for Newspapers Italy ( million) and Newspapers Spain ( million). This result reflects the margins from higher advertising revenue discussed above, the rise in the cover price of Corriere della Sera and of El Mundo.es, and the benefits on the first nine months of 2010 from the reorganization plan started in May 2009, which amounted to 21.2 million for Newspapers Italy and to 18.2 million for Newspapers Spain. An increase in EBITDA before net non-recurring expense for the Books segment (+ 3.6 million), thanks to good performance by the Flammarion Group, as well as the Education division and the Partworks segment, only partially offset by the downturn in EBITDA deriving from lower sales in the Fiction and Non-Fiction segment. This segment enjoyed 3.1 million in benefits from the 2009 reorganization plan. The increase in EBITDA before net non-recurring expense for Corporate Functions (+ 1.3 million), is mainly due to benefits totaling 3.7 million from the reorganization plan started in The substantial stability in EBITDA before net non-recurring expense for the Advertising segment without the intragroup gains of 1.4 million realized in the first half of 2009 on the sale of the Classifieds business (- 0.6 million). This segment enjoyed 1.1 million in benefits from the 2009 reorganization plan. The segment also benefited from good performance by newspaper advertising, especially in the first half of A decrease in EBITDA before non-recurring expense for the Dada Group which, without the consolidation of acquisitions made since June 2009, would have been 8.1 million. This decline is largely due to start-up costs incurred primarily in the first half of the year for the on-line poker service in response to the constant innovations demanded by the market, and to the effects of gradually withdrawing traditional mobile products in Italy, caused by continuous evolution in this particular market. Personnel expense was 49.4 million lower. Excluding net non-recurring income in the first nine months of 2010 amounting to 3.7 million and net non-recurring expense in the same period of 2009, amounting to 29 million, this decrease would have been 16.7 million. Provisions for risks at September 30, 2010 amounted to 6.4 million, reporting a decrease of 11.1 million on the corresponding figure at September 30, Before non-recurring expense, provisions would have decreased by 1.6 million, essentially due to fewer legal disputes in the Newspaper Italy area. Operating profit amounted to 40.5 million, compared with a loss of 56.3 million at September 30, Apart from the factors discussed above, operating profit reflects largely stable amortization and depreciation and impairment losses of 11.6 million in the first nine months of 2010 ( 14.4 million in the first nine months of 2009). Impairment losses at September 30, 2010 are unchanged compared to impairment losses already included in the Half Year Report at June 30, Specifically, they refer to the 10.1 million in impairment losses recognized against the value of the Dada Group's goodwill (already impaired by 3.2 million at December 31, 2009) as a result of the half-year impairment test at June 30, 2010, discussed in note 13 of the Half Year Report 2010, as 9

10 well as to lower impairment losses of 1.5 million. This compares with 14.4 million in impairment losses recognized in the first nine months of 2009, substantially relating to Skirà goodwill ( 2.8 million) and Digicast's television rights ( 0.9 million), as well as to impairment of property, plant and equipment of 10.7 million, including 10.2 million in non-recurring impairment of property, plant and equipment after reorganizing newspaper printing operations. Revenue, EBITDA and operating profit (loss) are reported below by operating segment, more details on which can be found in the section entitled "Operating segment performance". ( /millions) Cumulative at 09/30/2010 Cumulative at 09/30/09 Revenue EBITDA % of % of % of % of EBIT Revenue EBITDA EBIT revenue revenue revenue revenue Newspapers Italy (1) (2) % % % (0.9) (0.2)% Newspapers Spain % % (6.5) (1.7)% (26.5) (7.1)% Books % % % % Magazines (1.0) (0.6)% (2.0) (1.2)% (2.9) (1.6)% (3.9) (2.2)% Advertising (2) (8.7) (2.8)% (10.0) (3.2)% (7.6) (2.6)% (8.5) (2.9)% Dada (1) % (10.8) (9.5)% % % Television % % % (0.1) (0.5)% Corporate Functions 41.0 (7.4) (18.0)% (21.4) n.a 45.1 (15.0) (33.3)% (30.4) n.a Other and eliminations (304.6) 0.0 n.a 0.0 n.a (297.1) (1.4) n.a (1.3) n.a Consolidated total 1, % % 1, % (56.3) (3.5)% Assets held for sale and discontinued operations (3) (4.7) Other and eliminations (0.2) Total 1, % % 1, % (61.0) (3.7)% (1) Following a strategic agreement between Dada and Sony Music Entertainment, Dada Entertainment, a US company, has no longer been equity accounted but consolidated since the month of June In addition, Poundhost, a provider of hosting and virtual services was acquired on January 18, These transactions had an overall impact of 12.7 million on revenue and 2.5 million on EBITDA in the first nine months of On October 12, 2009 RCS Digital sold its subsidiary Fueps to Dada, meaning that the Fueps income statement was still consolidated by Newspapers Italy in the first nine months of 2009, which reported 0.2 million in revenue and a negative EBITDA of 0.9 million. Dada consolidated the Fueps income statement in the first nine months of 2010, contributing 0.2 million in revenue and million in EBITDA. Dada's operating loss at September 30, 2010 reflects 10.1 million for the impairment of consolidated goodwill identified by impairment testing, but it does not include 1.2 million in impairment of Fueps goodwill recognized by the Dada Group in the Interim Management Statement because this goodwill arises from an intragroup transaction. (2) Advertising segment EBITDA and operating profit (loss) at September 30, 2009 include 1.4 million in gains realized on the sale of the Classifieds business to Newspapers Italy. The elimination of the intragroup gain is included in the "other and eliminations" line. (3) Refers to the Unidad Editorial Group's printing operations and the operations of the subsidiary La Coccinella. Net financial expense amounted to 21.6 million, compared with 26.3 million at September 30, The improvement of 4.7 million is essentially due to the reduction in interest rates on borrowings and bank loans and overdrafts, as partly offset by the expense of interest rate hedging derivatives, by net gains on exchange rate differences, and by a reduction in average net financial debt. Net gains on financial assets and liabilities came to 4.9 million at September 30, They mainly refer to the gains realized on the sale of Poligrafici Editoriale ( 4.4 million) and of Raisat ( 0.5 million). They compare with zero net gains on financial assets and liabilities in the first nine months of The share of profits (losses) of equity-accounted investees was a net loss of 0.9 million in the first nine months of 2010, compared with a net loss of 4.8 million in the same period of The improvement also reflects the results of investees IGP Decaux, Finelco Group and investees in the Newspaper Spain area, and the effect of no longer equity accounting for Dada Entertainment, which is now consolidated line by line, and Eurogravure, following the decrease in the share of ownership. Income of 1.7 million derived from the negative goodwill arising on the Finelco capital increase, completed in April, at the end of which the RCS interest in this company had increased from 34.6% to 38.89%. In the same period of 2009, the partial implementation of the capital increase resulted in negative goodwill of 3.4 million. Income taxes reported 22.2 million in net expense at September 30, 2010 compared with 20 million in net income at September 30, 2009, which had mainly reflected the recognition of deferred tax assets on group company interim losses. Income taxes have been determined using the tax rules applying in the different countries and calculated as if the first nine months represented an independent tax period. The increase reflects the recognition of fewer deferred tax assets due to contraction in interim losses, and to deferred tax assets 10

11 recognized on reorganization provisions taxed in 2009 now reversed to the income statement as and when such provisions are utilized. The increase in income taxes caused by the above factors mainly refers to Newspapers Italy and Spain. Income taxes include 9.8 million in IRAP (Italian regional business tax) relating to Italian companies ( 8.5 million in the first nine months of 2009). The profit (loss) from assets held for sale and discontinued operations was zero, compared with a loss of 5.9 million at September 30, 2009, mainly reflecting the loss realized on the contribution of the Newspapers Spain printing operations and the losses reported by these operations in the first five months of the year. The profit attributable to owners of the parent amounted to 0.7 million in the first nine months of 2010, compared with a loss of 73.3 million in the same period of 2009, reflecting the various factors described above. Breakdown of the average number of employees by region The average number of employees at September 30, 2010 was 6,211 compared with 6,466 in the first nine months of the prior year. The decrease of 255 is mainly attributable to the Group's continued policy of improving efficiency under the reorganization plan affecting every area of its business. The decrease chiefly affected Newspapers Spain (-83 employees), Newspapers Italy (-57 employees), the Magazines segment (-33 employees), the Advertising segment (-20 employees), and the Books segment (-8 employees). The overall reduction in headcount also reflected fewer staff in Corporate Functions (-66 employees), also because of the disposal of RCD's business specializing in the production of radio news services (-33 employees). These reductions were only partly offset by increases at the Dada Group (+10 employees) and in the Television segment (+2 employees). The breakdown of the average number of employees by region is as follows: Italy Spain France Other countries Total September 30 September 30 September 30 September 30 September Newspapers 1,243 1,300 1,900 1,983 3,143 3,283 Books ,101 1,109 Magazines Advertising Dada Television Corporate Functions Consolidated total 3,274 3,459 2,003 2, ,211 6,466 Assets held for sale and discontinued operations (1) Imprentas (Unidad Editorial) Coccinella (Books) 3 3 Total 3,274 3,462 2,003 2, ,211 6,553 (1) Assets held for sale and discontinued operations in 2009 reflect the average headcount of Unidad Editorial's printing operations and of La Coccinella sold in

12 Reclassified consolidated statement of financial position ( /millions) September 30, 2010 % December 31, 2009 % Intangible Assets 1, , Property, plant and equipment Investment property Non-current financial assets Non-current assets 2, , Inventories Trade receivables Trade payables (656.4) (31.2) (652.4) (30.5) Other assets/liabilities (71.5) (3.4) (73.5) (3.4) Net working capital Provisions for risks and charges (86.6) (4.1) (110.5) (5.2) Deferred tax liabilities (145.4) (6.9) (147.0) (6.9) Employee benefits (73.4) (3.5) (78.8) (3.7) Net capital employed 2, , Equity 1, , Non-current financial liabilities Current financial liabilities Non-current financial assets recognized for derivatives (1.1) (0.1) (3.7) (0.2) Cash and cash equivalents and current financial assets (67.2) (3.2) (74.3) (3.5) Net financial debt (1) 1, , Total sources of financing 2, , (1) Indicator of financial structure, calculated as current and non-current financial liabilities less cash and cash equivalents, current financial assets and non-current financial assets recognized for derivatives. Net financial debt as defined by CONSOB in its Communication DEM/ dated July 28, 2006 excludes non-current financial assets and so is equal to 1,036.4 million ( 1,060.8 million at December 31, 2009). Net capital employed was 2,103.7 million, having decreased by 37 million compared to December 31, 2009, reflecting a decrease of 37.9 million in net working capital and a reduction of 30 million in non-current assets, only partly offset by a decrease of 30.9 million in provisions. The trends in the main components of net capital employed are discussed in the Notes to these Interim Consolidated Financial Statements. Net financial debt amounted to 1,035.3 million, having decreased by 21.8 million since December 31, This decrease was primarily because of cash flows from continuing operations, only partly offset by investments in property, plant and equipment and the progressive payment of costs associated with the current restructuring process. For information on cash flows, refer to the comments provided in the specific notes: ( /millions) 30/09/10 30/09/09 Total cash and cash equivalents generated (used) in operating activities Total cash and cash equivalents generated (used) in investing activities (59.2) (61.0) Total cash and cash equivalents generated (used) in financing activities (40.0) 5.2 Net increase (decrease) in cash and cash equivalents (A+B+C) (12.1) (12.5) Opening cash and cash equivalents (1.7) (1.4) Closing cash and cash equivalents (13.8) (13.9) Increase (decrease) for the period (12.1) (12.5) 12

13 OTHER INFORMATION On September 25, 2009 Dr. Angelo Rizzoli served a writ of summons against RCS MediaGroup S.p.A. (as Gemina s successor), Intesa San Paolo S.p.A, Edison S.p.A., Mittel S.p.A. and Giovanni Arvedi. With this summons, Dr. Rizzoli requested that the Court of Milan declare the deeds used in 1985 to purchase the shares of the then-rizzoli Editore null and void, as well as the return of the shares and related rights for an equivalent amount, which he quantified as an amount between 650 million and 724 million. The preliminary hearing, initially set for March 16, 2010, was postponed to June 15, 2010 to permit RCS MediaGroup S.p.A. to summon Gemina S.p.A. With measure dated June 10, 2010 the hearing was postponed further, to June 29, During said hearing, the Court granted the terms for submission of briefs pursuant to art. 183, paragraph 6 of the Italian Code of Civil Procedure, which were expressly granted also for illustration of all of the preliminary objections raised in the proceedings. Lastly, the proceedings were postponed to January 18, 2011, with the specific granting of the terms pursuant to art. 183, paragraph 6 of the Italian Code of Civil Procedure. 13

14 OPERATING SEGMENT PERFORMANCE 14

15 NEWSPAPERS ITALY Segment profile The Newspapers Italy segment comprises the editing, production and marketing of publications relating to the titles Corriere della Sera, La Gazzetta dello Sport, and City. Corriere della Sera, the leading national news and information daily, comprises a structured, integrated platform of paper and digital information media, including the national daily, a network of local titles, the weekly Sette, special inserts and general interest and specialized supplements, as well as the corriere.it website. La Gazzetta dello Sport is the leading national sports daily and comprises a structured, integrated platform of information media, including the national daily, the weekly Sportweek, special inserts and specialized supplements and the gazzetta.it website. City is a free press daily with a national distribution and local editions in Italy's major cities. This segment also includes RCS Sport, which organizes and runs the Giro d'italia and other cycling races and sporting events, RCS Digital, which manages development of the titles on digital media, and Trovolavoro srl and Trovocasa srl, which are respectively devoted to personnel search and property sales. This segment also manages advertising relating to sporting events and classifieds. Financial highlights ( /millions) 3rd quarter 2010 (3) 3rd quarter 2009 (3) % Change Cumulative at 09/30/2010 Cumulative at 09/30/2009 % Change Publishing revenue (4.8) Advertising revenue (2) Other publishing revenue (25.0) Total revenue from sales and services (1) EBITDA > >100 (1) of which add-on product sales: (2) Advertising revenue at September 30, 2010 includes million earned through the Group's advertising concessionaire, net of the margin retained by the concessionaire ( million at September 30, 2009). (3) On October 12, 2009 RCS Digital sold its subsidiary Fueps to Dada, meaning that the Fueps income statement was still consolidated by Newspapers Italy in the first nine months of 2009, which reported 0.2 million in revenue ( 0 million in 3rd quarter 2009) and a negative EBITDA of 0.9 million (- 0.3 million in 3rd quarter 2009). Market trend The specific economic climate continues to have an uncertain outlook, with a very weak recovery in Italy. In this climate, according to the figures published by Nielsen Media Research (January-August 2010 figure), advertising investments in the first eight months grew by 4.8% on the same period of 2009 (which reported a 16.4% contraction on the corresponding period of 2008). Press media lost an overall 3.8%. The slight decline for paid newspapers (-0.3%) was contrasted with the sharp decline in the free press (-10.8%) and magazines (- 8.4%). Positive performance was achieved in Internet (+17.7%) and Radio (+12.8%). The ADS mobile average from January to July 2010 shows circulation of dailies dropping by 8.6% for generalist dailies with circulation of more than 100,000, and a decrease of 5% for sports newspapers, which benefited from sales relating to football events in the first part of the year. Segment results Consolidated revenue amounted to million, an increase of 1.2% on the same period of 2009 (+6.2% excluding sales of add-ons). Net advertising revenue totaled million, up by 8% for all the segment s media, with the exception of free press, supported by a recovery in the third quarter, confirming the results posted in the first half of the year. Excluding add-on sales, distribution revenue would have grown by 4.1%, reflecting steady sales of La Gazzetta dello Sport and benefiting from the increase in the cover price of Corriere della Sera at the beginning of the year. 15

16 The two paid newspapers retained their overall circulation leadership in their respective market segments. Corriere della Sera had average daily circulation of 484,000 in the nine months (RCS figures); down by 10.7% compared to the same period the year before, as a result of reducing distribution through promotional channels and the 5.1% decline in newsstand sales despite the price increase effective from January 2. La Gazzetta dello Sport had an average daily circulation of 341,000 (RCS figures), which was 5.5% lower than the same period of 2009, only due to the effect of the cut in distribution through promotional channels, while newsstand sales rose by 0.7%. Revenue from add-on products amounted to 63.5 million, 21.9% below the first nine months of the prior year, confirming the weak state of consumer spending resulting in lower average sales per individual initiative. Corriere della Sera publications (including supplements, local editions and the Internet) posted 2.4% growth in net advertising revenue, with the print sector in line with 2009 but the online one surging 42.1%. The Gazzetta dello Sport publications (including supplements, local editions and the Internet) posted 25.5% growth in net advertising revenue, thanks to the sporting events in the first half of the year (National Championship, Champions League and the World Cup), with an increase of 81.3% in the online segment. City publications reported a 7.1% drop in advertising revenue, reflecting a decline for the daily (-5.5%) and for the free monthly Urban, which was affected by the negative trend for magazines. Actions continued to strengthen both titles and the publishing platforms that they head. The print version of Corriere della Sera added new pages from June 21 to its Milan edition Corriere di Milano to provide new information serving citizens, covering different issues over the week. The significant development on new media continues, which will result in increasing distribution of content over multiple platforms. From May 28 it has been possible to read both Corriere della Sera and La Gazzetta dello Sport on the Apple ipad. The two applications, for payment from July 30, allow readers to access multimedia enhanced content, high quality video and audio reproductions and photo galleries, with the aim of offering a genuine multimedia information platform. The digital editions of the newspapers exceeded 12,000 active subscribers at the end of September. From the end of May to the beginning of September, over 120,000 applications were downloaded (RSC figures). The on-line sector continued to expand its business in the period, with a steady growth in all the traffic indicators for Newspapers Italy websites, which reached a total of 25.1 million unique users on average per month in the first nine months of the year (+32%) and 27.7 million in September (Audiweb figures). The corriere.it website reached 17.8 million unique users per month in the first nine months of the year (+33%), while the average number of unique users per weekday was 1.5 million (+23%) and the number of pages viewed 371 million. The websites of the local editions had 4.3 million unique readers in September, becoming the market leaders in the main cities served (Nielsen Site Census figures). The gazzetta.it website reached 10.7 million unique users per month (+29%). The average number of unique users per weekday was 924,000 (+21%) and the number of pages viewed 326 million (Audiweb figures). As for the mobile versions of the two websites: in September, Corriere Mobile reported 515,000 unique users and 4.1 million pages viewed, while Gazzetta Mobile reached 785,000 unique users, doubling the audience in September 2009 (371,000 users), and 9.9 million pages viewed (6.5 million in September 2009 Nielsen Site Census figures). Active smartphone subscribers to Corriere della Sera and La Gazzetta dello Sport at the end of September totaled almost 13,000. From the beginning of the year to the end of September, over 490,000 applications were downloaded (RSC figures). The first nine months saw continued measures under the reorganization plan started in May 2009 to save costs (particularly on the industrial front) and to become structurally more efficient. The benefits in the first nine months of 2010 amounted to 21.2 million. Total operating costs, excluding personnel expense, came down by 10.9% on the corresponding prior year period, without however affecting product quality or services offered. Total personnel expense for the Newspapers Italy segment, excluding non-recurring expense and income, fell by 6% on the same period of 2009, reflecting the benefits of the two-year voluntary early retirement plan for journalists approved at the beginning of the year, as well as the measures in progress relating to printing staff. 16